The twenty-five cent stamp; why it's here and why it shouldn't be

Washington Monthly, Nov, 1987 by Marianne Szegedy-Maszak

The Twenty-five Cent Stamp

Do you know your nine-digit zip code? You know, the snazzy one with the extra four numbers that was supposed to bring your mail service into the 21st century? Well, if it escapes you, don't worry, you're not alone. Most people don't know their nine digits, let alone use them. The U.S. Postal Service has spent $1 billion in the past six years on special nine-digit scanners, a promotional campaign, and big discounts to get business to (please) use the new system. Yet after all that, only 6 percent of outgoing mail has a nine-digit zip code on it.

"Maybe it doesn't have as big a place as we thought five years ago,' conceded Postmaster General Preston Tisch in September. Well, what's a billion here and there? As it happens, to the Postal Service, it's nothing new. In the same speech in which Tisch acknowledged that Zip Plus Four hasn't changed our lives, he also admitted that the Postal Service had busted its budget (for the eleventh time in the past 16 years)--this time overshooting its projected $1 million deficit by $244 million. He also said he expected a $400 million gap for 1988.

Citing that huge deficit, Postal Service officials in May sent a new proposal for a postage increase to the Postal Rate Commission for review. If it is approved, as expected, first-class postage will jump 15 percent; the cost of second-, third- and fourth-class mail will rise more than 20 percent. Postal patrons take note: The 25 cent stamp has arrived.

In defending such rate hikes, the Postal Service argues that it is a business, by God, and a piece of mail has to pay its own way. But if the U.S. Postal Service was a real business it would have gone belly up years ago. After each financial fiasco, Postal Service managers face no shareholders, no competition and, unlike the old days when Congress directly controlled the postal system, few angry legislators. The Postal Service is probably the only bureaucracy besides the Pentagon allowed to go on a binge and never face the hangover. The Postal Service dwells in a Twilight Zone where it is accountable neither to government nor the market.

Lost and mangled

Until 1971, Congress controlled all wage changes, rates, and management and employment levels in the post office. Critics of this system charged that congressmen used their influence to dole out jobs and contracts to supporters. What was needed, they said, was more independence to keep costs down and politics out. After all, the Postal Service employs 806,000 people and spends $30 billion a year. Apart from the Defense Department, no federal entity buys more stuff than the Postal Service. "The Postal Service is the largest tenant, the largest user of trucks, the largest user of uniforms, and the largest user of rubber bands,' said David Minton, former chief of staff of both the House and Senate Post Office committees.

In an attempt to make the Post Office more businesslike, reformers created a strange modern hybrid, a quasi-independent government corporation called the United States Postal Service. But the architects of this system forgot one thing: The Postal Service is a monopoly. Without market competition on first-class mail delivery to keep it in check, the Postal Service has distinguished itself with deteriorating service, soaring costs and burgeoning debt.

Officials acknowledge that despite advances in communications and transportation, mail delivery is 10 percent slower today than it was 15 years ago. And costs continue to rise. Before reorganization the first-class rate was 6 cents-- having risen just 3 cents from 1919 to 1968. Since then, first-class postage has almost quadrupled, despite federal subsidies of $20 billion between 1970 and 1985. If the rate of inflation determined rate hikes, we would be paying 17 cents today for a first-class stamp instead of the proposed 25 cents.

Each new "businesslike' Postmaster General brought to the job a new technique for wasting money. The trend began even before formal reorganization. No doubt you've read the report of the 1968 Presidential Commission on the Postal Service, the one concluding that it needed managers who understood commerce, not politics. A year later, President Nixon chose general contracting mogul Winton Blount as postmaster general. Blount reigned from 1969 to 1971, and is to be congratulated for one of the Postal Services most expensive errors--the $1 billion National Bulk Mail System.

This was intended to make the Postal Service competitive with the United Parcel Service by creating 21 enormous bulk mail centers. But according to a Ralph Nader watchdog group, the system "lost money, slowed delivery, [and] mangled parcels.' Even the federal government uses the private United Parcel Service more than it does the Postal Service to mail packages. To be sure, the program had its fans. After he left office, Blount's construction company won $91 million worth of contracts to build four of the centers.

Next up was Elmer T. Klassen, a 40-year veteran of the American Can Company, who took over in 1972. Klassen started slashing--not postage rates or waste, but services and employees. By reducing Saturday window hours, street box collections, and mail deliveries, he cut the postal workforce by 30,000. But some essentials were spared the budget axe. In 1973, he moved the national staff to a new $30 million headquarters in L'Enfant Plaza. And the new frugality didn't keep the Postal Service from awarding big contracts to his friends, in one case giving $815,000 worth of business to the advertising firm of Charles Burnaford, a colleague of his at American Can.